What has the Regional Growth Fund ever done for us?

MICHAEL Heseltine became the face of regional development for the Thatcher government in the early 1980s.

The lion-maned troubleshooter defied ministerial colleagues who favoured abandoning northern towns to a managed decline, and seized the opportunity to make a name for himself by leading a programme of urban regeneration in communities such as Liverpool ravaged by riots and unemployment.

Merseysiders were so impressed they later put aside their anti-Tory tendencies and awarded Tarzan - a nickname Heseltine played on in the title of his autobiography Life in the Jungle – the freedom of Liverpool, an accolade he shares with the likes of Ken Dodd, The Beatles, Nelson Mandela and Hetton le Hole’s Bob Paisley.

So it was no surprise 30 years later when the Coalition needed someone to give their flagship jobs scheme some punch that they called on the now Lord Heseltine to get on his bike and tour the regions.

When the Heseltine roadshow arrived in Newton Aycliffe, County Durham a few weeks before Christmas 2010 it felt like one of those Eighties pop revival acts had rolled into town. In front of a crowd of business leaders in the auditorium of the Xcel Centre he delivered a greatest hits set of soundbites – urging the assembled throng to ignore Whitehall and take charge of their own destiny. "Power to the regions," was his clarion call. But the Cameron government wasn’t yet convinced by the idea of handing billions of pounds to regional decision makers. Not for the first time the maverick Heseltine was painting on a huge canvass while his party worked away in miniature.

The Coalition launched the Regional Growth Fund (RGF) – a programme aimed at boosting areas that were about to be savaged by George Osborne’s spending cuts. Heseltine and Nick Clegg fronted the campaign which would offer companies the chance to bid for cash to help create jobs.

That afternoon in Aycliffe, Heseltine encouraged bidders to step forward, but he made no bones about the fact that the fund would offer relatively small amounts of public money and the lion’s share of regeneration money would have to come from private investment.

Accusations that the government paid lip service to regional policy and tried to deliver it on the cheap have dogged it ever since.

The initial reaction from local firms was muted. Ten days before the deadline for bids to the first tranche of funding The Northern Echo revealed that no bids had been submitted from our region. That proved to be a false alarm as the fund was massively oversubscribed.

Tees Valley's first round bids were the most successful in the country when £26m was awarded. But only five of the 27 bids submitted by Tees Valley Unlimited (TVU) were successful despite ministers deciding to allocate more than £450m in the first round rather than the £250m originally planned.

Nissan, Cleveland Potash and Redcar iron and steelmaker SSI were among the North-East winners, sparking criticism that the Government had favoured established firms and ignored a host of worthwhile schemes. The subsequent launch of the £30m Let's Grow Fund helped smaller firms to access support.

Teesside transport firm AV Dawson – another successful bidder in round 1 - used the promise of RGF cash as a springboard for its growth plans.

In the second round 492 bids worth a combined £3.3bn competed for a funding pot of about £1bn. The North-East again had an impressive list of successful bids – securing a total of £100m which ministers claimed could create and safeguard 25,500 jobs.

Cummins Engines in Darlington, Newton Aycliffe based car chassis maker Thyssen Krupp Tallent, Hartlepool offshore engineering firm Heerema and the chemicals industry were among 50 regional successes. But it was also announced that millions of pounds from the Government's limited pot of money had been promised to prosperous southern shires.

It began to emerge that it was taking ages for cash to be paid out amid criticism that successful bidders were being tied up in red tape. Six months after they had been named winners in the first round, only eight of 50 companies had been paid.

Iain Wright, Labour's Shadow Business Minister and MP for Hartlepool accused the Coalition of prioritising publicity over delivery as it made bold claims about new jobs but delayed putting cheques in the post. The Department for Business said it was protecting the interests of taxpayers and making sure that money was not being wasted – “and unfortunately it takes time."

The region continued to perform well in further rounds, as the likes of TVU became increasingly adept at helping bidders to negotiate the process. Plastic parts maker Nifco tapped into the fund to support its move from premises in Stockton to two purpose-built centres of excellence at Eaglescliffe.

There were also tales of woe.

Durham Tees Valley Airport was repeatedly denied cash, while trailer firm Tinsley Special Products and Seaham-based Cumbrian Seafoods both collapsed, despite being RGF winners.

Last week, in a very low key announcement, the final round of winners were named. The RGF went out with a whimper; Heseltine's stirring words were a distant memory.

PANEL:

WE asked business leaders if RGF been good for our region and how could it be improved?

Mike Matthews, managing director of Nifco UK and European operations officer: “I am a firm believer that investment can unlock the potential that exists in businesses and in our case, the support we received from the RGF has allowed us to make a move that has been a major catalyst in the rapid development we have seen in recent years.

“Our old facility was prohibitive – it was limiting our potential. Nifco Inc, our Japanese parent company, placed a major vote of confidence in the business when it committed to supporting Nifco UK with the move to its first new factory in 2012. And RGF support was a demonstrable commitment from UK Plc to match that belief – to show that the UK wants to attract and retain companies like ours.

“Both Nifco House, and our more recently opened R&D facility could not have opened without the support of RGF – and, for Nifco, the second facility positions us well to lead the way on a European stage. It was an important statement about the direction Nifco UK is moving in. It’s no longer about just making parts – it’s about being the brains behind business development. In that context, the value RGF has added to our business is made even more significant."

Paul Duncan, chairman of foundry business Bonds, based in Crook, Tow Law and Alston:

"RGF a good idea but we have never applied because most of West Durham is not in an assisted area and we have been unable to get a definitive ruling that steel re-processors such as us, don’t fall within the general European exclusion for aid to steel making.

"As to how the scheme works, there seems to be onerous and delaying due diligence rules resulting in many successful applicants falling by the wayside.

"Also there are a great many intermediaries involved which presumably have to be paid for somehow and I question how some of the large foreign-owned companies who have been successful can have justified their need for regional development aid for their projects."

Kevin Fitzpatrick, at Nissan Sunderland:

"Alongside a number of projects in the automotive supply chain, the RGF has provided direct support for two major model car launches in Sunderland.

"The first was the new Nissan Note, which went into production in 2013 and was responsible for adding 2,000 new jobs to the UK automotive industry.

The new Note, with its advanced safety features and dynamic styling, was one of three Nissan models launched in an unprecedented 12-month period, beginning with the all-electric Nissan LEAF and ending with the arrival of the new Nissan Qashqai, the most successful British-built car.

"The next milestone in our history will be the introduction this year of premium vehicle manufacturing to Sunderland through the Infiniti brand.

The launch of the Infiniti Q30, also supported by the RGF, is taking our investment in Sunderland since 2010 beyond £1bn, with over 1,800 people added to the Nissan workforce in that period."

Neil Foster, of the Northern TUC:

"Sadly decisions relating to the RGF has been run too much by London-based politicians and Whitehall civil servants rather than in the regions it was meant to serve. We had perfectly good infrastructure ready to deliver such a programme in the North-East with our Regional Development Agency and the Government Office but the Coalition shut both.

"At a time when we should have been powering ahead with investment and growth, ministers chose to break up something that was working and throw away a lot of skill and experience in the process.

"It's no surprise to that the whole process has been sluggish and most of the money has not been spent in a timely fashion or any degree of urgency. Regions should have been given a bigger say in which bids were approved and successful bids should have contributed to a broader economic plan as well as be valuable in their own right. Our region still has the highest unemployment in the country and over the last two years employment is growing in London and the almost South-East twice as fast in the North-East.

"There are a number of reasons why this government has failed to rebalance the economy and what's frustrating is that had the Regional Growth Fund be run differently it could have made more of an impact and sooner. Investing in the north is good for our region and for the UK as a whole and any shortcomings of the RGF shouldn't get in the way of that crucial message."

Pamela Petty, managing director of Aycliffe manufacturer Ebac:

“The RGF process has worked extremely well for Ebac, enabling the company to establish the manufacture of washing machines.

“Around three million washing machines are bought in the UK each year, all of them imported. We have spent years exploring not only the feasibility of manufacturing washing machines, but also the processes involved and we are very confident of having a high quality, competitive product on the market in 2015. None of this would have been possible without RGF.

“Firstly, I would make it non competitive as I think this can make the process too long. An Advisory Panel scrutinises applications before Ministers decide which project to support, then follows the important due diligence before final terms are agreed. The process is also bound to fixed deadlines which can make the timing wrong for some projects.

“I would also make any grant money not used available to accelerate or expand existing projects and very importantly, the allocation shouldn’t be reliant on postcodes, every region should benefit.”

Alastair Wilson, tax partner at Tait Walker Chartered Accountants:

“The RGF has helped a broad range of our clients.

“It has been visibly weighted towards regions where financial help has been needed most i.e. in the North-East and has also been weighted towards sectors where our region will benefit most obviously, such as the expansion in manufacturing, engineering and automotive supply.

“I would make the competitions more regular in timing by having regularly scheduled RGF rounds so that companies can forecast when funding will be available, and so can build project fundraising timetables around those scheduled RGF rounds. At the moment the RGF rounds are irregular in nature.

“Make the application process more easily understood by the end user and make it more transparent in terms of what factors will result following a successful bid. A client of ours applied and was unsuccessful, but was then asked by the administrators of the RGF to reapply and was successful in a subsequent RGF round, with exactly the same bid documentation.

“Ensure the application process has a lower financial threshold for a single project bid – the project sizes needed for a company to make an application are typically large capital projects for our region. This by its very nature means that the support tends to go to the largest companies in the region for whom funding is more likely to be available anyway. A good example is the four companies who won in round six – one of whom is one of the world’s largest and most financially successful companies. Whilst the Lets Grow Fund does provide support to smaller projects, there is a large jump in project size between those supported by Lets Grow up to those supported by the main RGF fund.

“The cost of applications, and the cost of the due diligence required once an initial offer has been made can act as a significant barrier to SME’s and could easily be made more cost effective.”